The recent Xbox 360 dashboard update may come with a load of new video apps--but apparently, video playback itself has been borked by the recent firmware upgrade.
The new dashboard forces video content to be run at "limited range RGB levels," versus "full range" RGB as the console previously did. The end result is a washed out look that has many videophiles quite unhappy.
Eurogamer's Digital Foundry blog has damning evidence, concluding that "the video player in the new interface doesn't work properly any more." Tests comparing Xbox 360s before and after the update show that colors are far less pronounced after the update, and blacks become more like grays. The site concludes that this "bug" highlights far more video compression artifacts due to the system's faulty color reproduction. "Macroblocking that would be otherwise be less apparent within darker colors is now more readily visible."
Digital Foundry used Photoshop color level histograms to analyze output from Xbox 360 systems before and after the update, and noticed "a standard limited vs. full range RGB comparison." The report doesn't offer any solutions, because while adjusting monitor settings can help video playback, gameplay (which is unaffected by this glitch) would then be adjusted correctly as well.
We've contacted Microsoft to see if there are plans to correct this bug with a future system software update.